Is Home Equity a Viable Retirement Strategy?

By Brenda Chmelyk

Life is busy; where we are going demands our undivided attention. Rarely do we allow ourselves a backward glance unless we’re shoulder checking to merge into the fast lane. Unfortunately, this has many of us repeating mistakes instead of investing in the wise counsel of our past.

In July, the Canadian government and the Canadian Mortgage and Housing Corp. (CMHC) implemented bold changes to Canadian mortgage rules. Why? To make it harder for Canadians to get a mortgage, thereby hopefully decreasing household debt and splashing cold water on the country’s boiling real estate market. In the long-term, a market correction can lead to more affordable homes. But in the short term, how will this affect Canada’s baby boomers as they edge closer to retirement? How is it already affecting the retirees that comprise 14 per cent of the population?

Nobody wants the economic crisis that our neighbors to the south have endured for the past three years, but are we overreacting?

According to a survey by Harris Decima and funded by CIBC, 59 per cent of retired Canadians are in debt. Have we ignored the wise counsel of our elders who came out of the Great Depression declaring that the key to a healthy, wealthy retirement is cleaning up all outstanding debt? I can still hear my Grandma saying, “You know you’ve made it when your house is paid off.” With only 5 percent of the room for RRSP contributions being utilized, it would seem many of us are banking on our home equity to carry us into our golden years.

Many financial experts agree that home equity is the biggest source of retirement income for Canada’s aging population. With government pulling the financial strings that ultimately have an impact on real estate market values, how do we preserve our home equity?

ANSWER: We still have a say in how and where we spend our money.

Three Strategies for Preserving Your Home Equity for Retirement

Downsize your “stuff”

The more we have, the more we have to worry about. Save valuable energy and costly moving and/or storage fees by selling, recycling and giving away goods that may have been useful to you at one time but simply take up valuable space now. Distribute big sentimental personal items among friends and relatives; that way, they can enjoy them – and so can you!

Do your research

Investigate the cost of living in different areas. You may be downsizing on space and property taxes, but how much will condominium fees set you back?

Where are the bus stops? Is it more cost-effective to trade in a maintenance-hungry old car for a bus pass? How close are you to major airports for that retirement travel you’ve been planning? Compare the benefits to eliminating burdensome debt with the savings of living in a smaller dwelling and establishing a savings cushion to supplement fixed pension incomes.

Save by selling your home yourself

The thought of selling a home that you’re emotionally tied to can be overwhelming. It would seem a logical choice, then, to enlist the services of a professional to help ease the pain. But consider for a moment that the average Canadian dishes out almost $13,000 in agency commissions! Is there a way to keep that commission and enjoy a safe and successful home sale? Yes, there is. My Virtual Agent was created to assist in this process providing all the benefits of a traditional agency and all the savings of a “for sale by owner.” For less than 10 percent of what traditional agencies charge, you can get all the tools and information you need to sell your biggest asset and maximize your retirement nest egg. 

Brenda Chmelyk has been a top-producing British Columbia Realtor specializing in residential markets and created My Virtual Agent and Free Virtual Listing Service. For more information on a home-selling package to suit your downsizing needs, visit Friend us on Facebook for current news, trends, stats and tips. Or follow us on Twitter: @myvacom